I am so impressed by this approach being used at the very innovative AltSchool.

Since 2013, Max Ventilla has been working to reinvent one of our most basic civic institutions for the modern era: Elementary school. As founder and CEO of AltSchool, he’s leveraging the tech and business innovation of startups to personalize education for every student. It’s no small task — and it’s going to take the full commitment of every person on the team.

That’s why providing meaningful feedback to employees is as crucial to AltSchool’s mission as the latest teaching tools. “People's performance can be radically improved by getting the right feedback the right way. It's not only bad for the employee, it's really bad for the organization, too, to have someone who's underperforming,” says Ventilla.

Since the company’s inception, performance reviews have been prioritized to a degree rarely seen at young companies. It’s a lesson Ventilla learned from observing two ends of the organizational spectrum: Google, where he spent years as a top product manager, and the handful of startups he’s founded, advised or invested in. The former is well known for a rigorous system of evaluation; the latter confirms the need for it.

“I’ve seen a lot of companies that really hit the wall around three, four, five years in,” says Ventilla. And there’s a common pattern: “Everything starts out very loosey-goosey, and then they do a round of financing, grow a lot, and suddenly have a need for professional managers.” Often, those early directors or VPs are hired from outside the company, leaving the existing team frustrated and confused. “Many times you have a real star performer who has done great work and gotten clear praise for years. Then you hire someone over them, and pretty justifiably they say, ‘What the hell?’"

What follows is a difficult conversation about the skills the company is looking for in management — skills that a star performer likely could have developed over the preceding months had they gotten the feedback they didn't know they needed. Unfortunately, the pattern usually ends with a valuable employee leaving the company.

“That's not to say that it's not worth the eventual cost, and that you shouldn't take advantage of that early informal period,” Ventilla notes. “Hiring in someone new may be the right call, but it should at least be a deliberate call.” When he founded AltSchool, he knew right away that he wanted to go the other way and skew toward formal reviews from the get-go so that people capable of scaling with the company had the opportunity to do so. “We’re in education, and believe that schools should implement the best elements of the twenty-first-century workplace," he says.

We thought, ‘Well, shouldn't the workplace take the best elements of a great education experience, too?’ One of those elements is getting frequent and transparent feedback.

What follows is a detailed description of how Ventilla re-engineered the performance review systems he experienced at Google and elsewhere to champion and bolster the right employees at startups, and to give people the support they need to get better in a fast-changing environment.

Find the Right Cadence

When you’re first structuring your performance review process, the first step is to consider the interval that will work best for your organization. In Ventilla’s experience, the standard year is far too long for startups, where things could be totally different in just a quarter.

“If someone comes to you and says, ‘Look, your performance over the last whole year was not that great,’ it's hard to take that in stride," says Ventilla. "It’s hard to hear that and say, ‘Great, I'm going to do better.’ Mind you, if someone said, ‘Your performance over the last week was not that great,’ that's very easy to take. You might even say, ‘Thank you for noticing. Last week was a tough week.’”

Your goal, then, is to find a frequency that is practical and suited to your company’s culture — something between a year and a week. AltSchool quickly landed on quarterly reviews, which best matched the pace at which the company was growing and changing. “In a startup, things change so often that doing annual performance reviews seems just useless. We may have overcomplicated our process at AltSchool at the beginning, but we knew we’d be working at it for a while, and it was too important to do without. So we said, ‘We might as well just get started.’”

Four review periods a year might sound like a herculean undertaking, but as Ventilla’s seen, every go-around actually shortens the review process and makes it more effective. “We’ve done this for 10 quarters now, and every time we also ask people for feedback about how the process could have been better. We’re iterating each time in small ways, but over ten iterations, there's been a huge amount of improvement,” he says. For example, AltSchool has significantly tightened the time frame for each review period, getting it down to just a couple of weeks at the start of every new quarter.

They also collect data to reflect the improvements they’ve made. “We always measure how much time reviews take. Per quarter, it's about two hours for the average employee, five hours for the average manager and about 16 hours for the average person on the Calibration Committee,” says Ventilla. Impressively, those numbers have stayed roughly constant, and even dropped a bit since formal reviews began — despite AltSchool’s staff growing from 25 to over 160. “Our process is actually keeping pace with our growth, which was our objective. We didn't want to allow this to just balloon.”

How It Works

Prep

When it’s time to get started, everyone in the company receives the necessary instructions by email. And your system can be low-tech to start. “Initially, we were basically sending around Google Forms and using spreadsheets,” Ventilla says. “We’d send calendar invites to everyone to indicate when it was time to do the next thing.”

There also needs to be a dedicated point person in charge of the mechanics for the week or two it’s going on. For AltSchool, that initially fell to a member of the company’s administrative support team, with the VP of Operations pulling all of the completed reviews together; now it’s an HR function. Whoever you choose, though, you must deputize someone who can competently project-manage the process. “You want to make it as plug-and-play as possible,” says Ventilla. “If you’re trying to get away with a handful of senior people figuring out reviews together, either it’s not going to work or it’s going to take a lot more time than it should.”

Self-Reviews

Every quarter, the first step of the process is each employee’s self-review, which is fairly standard. The goal is to honestly self-assess by considering basic questions like:

What areas of largest impact did you have on your projects, your team or the organization?

Employees are also evaluated by select peers, who they choose but who their manager needs to approve. (That’s intended to speed up the process more than anything; in Ventilla’s experience, attempts to game the peer-review system aren’t particularly common.) Everyone gets at least two peer reviewers, and some people get more. “The manager will look over the list and basically say, ‘Is this a reasonable cross section of the people that work with you? Am I getting any information that I particularly want?’ And they’ll also ask, ‘Do you have too many reviewers, where we're just wasting a lot of people’s time and it's not providing that much extra value?’" AltSchool is still small enough that Ventilla himself then reviews all final peer review plans.

Once those lists are set, reviewers get to work, tackling questions similar to what employees answer about themselves. They'll also give the person they’re reviewing a rating, based on a clear scale: unsatisfactory, needs improvement, meets expectations, exceeds expectations or truly exceptional.

Ventilla is quick to note, though, that the most successful review process is not one in which everyone scores a “truly exceptional” at every stage. “The way that we do it is that the average should be a low exceeds expectation. You don’t want inflation. If you're struggling to meet expectations or you need improvement — even if your work isn't satisfactory — that’s a useful signal. There's action that should be taken as a result of that.”

While peer reviews don’t get into the granularity of where the employee falls within each rating, there is a section for the manager’s eyes only where reviewers can share additional thoughts or detail.

Manager Reviews

With both self-reviews and peer reviews in hand, managers then write their reviews for all members of their teams. Ventilla’s advice to managers is to write a draft before reviewing all the outside input, but only a rough one. “Don't immediately go and read everybody else's. But also don't write your own all the way down, and then as an afterthought look at what other people have written,” says Ventilla. “The best manager review has its own take, but really balances that take with what other people have said and provides a clear summary.”

First, the manager assigns a rating, and here, it’s even more granular. Each rating, with the exception of unsatisfactory, is accompanied by a numeric score from zero to four.

Then there is the “free write” portion of the review, generally a bulleted summary. “The intention is to get as much signal as possible,” says Ventilla.

Basically, spend your time on the areas that will be hard for the person to accept. If something is not going to be hard for someone to take or understand, just bang it out.

Finally, managers give the committee that oversees performance reviews their impression of the employee’s growth trajectory and whether they expect to put that employee up for a promotion in the near term.

One final note on this process: Done right, performance reviews should help support every employee’s ambitions for growth. Every employee. CEOs, too. “I've really benefited from having a formal review process,” says Ventilla. “I had a down quarter last quarter and got very actionable feedback, and I've been acting on it.” Currently, AltSchool’s CTO gathers Ventilla’s review information; but down the road, that might fall to the board. The most important thing is simply that everyone gets this crucial opportunity for improvement.

Achieving meaningful reviews also means that every managers’ direct reports should be included among their peer reviewers. “I don't really understand how you have an organization where managers review all their reports, but reports don't review their manager. Frankly, if I had to have one, I would rather have all reports reviewing their manager than the other way around,” Ventilla says. Don’t give short shrift to evaluating the very people most responsible for shaping your company’s culture and direction.

Calibration Committee

In the final step of AltSchool’s process, all review packets are evaluated by what’s known as the Calibration Committee, a six-person panel comprised of VPs at the company and higher. Every employee’s packet is read by at least two people: the top-level supervisor of their department and one other member of the committee.

As with every step of this process, the primary goal is to equip each employee with actionable feedback. “Committee members will flag whether they think that this person needs to be discussed or the manager review covered it. Generally someone will be discussed if the manager's review seems off, or if they’re particularly weak or particularly strong,” Ventilla says. “We want to be sure these reviews don’t just say, ‘Okay, something will happen eventually.’ They should say, ‘This person is high growth. These are the things they need to do. This is how many quarters out I think it can be done. Here's what I'm doing for them. Here's what the organization needs to do.’"

Of course, another key responsibility of the committee is to, well, calibrate. First, they review all employee ratings by level. AltSchool’s organization includes ten levels, from interns at Level 1 to C-level executives at Level 10. Starting with the Level 1s, the committee ensures that, say, a “meets expectations 3” has been applied consistently. “We ask, ‘Does this seem right?’ Or are two people getting an ME-3, when actually one of them seems like they should be above or below the other?” As a result, ratings may be tweaked at this stage.

Next, they take a look at everyone who got the same rating at different levels. “Again, we’re asking, ‘Does this seem right?’ We look at, say, all the 'exceeds expectations 0s (EE-0s),' even though some of them are at Level 2 and others at Level 6. Then we say again, ‘Do these people seem to line up?’” The result is a consistent baseline, for every rating. “An EE-0 means the same thing across any function, across any level.”

As AltSchool has refined this calibration process, the benefits have extended beyond every quarterly review. It’s also become a way to catch small performance changes that would slip through the cracks of a less methodical system — and certainly elude an annual review cycle.

“Someone might have been at ‘exceeds expectations 1’ for a year and a half, and now they’ve slipped to an EE-0. In a case like that, they’re still doing totally fine. But unless you had this level of data, you would never highlight that potential problem area. Not even a problem — just an opportunity for a manager to check in with that employee and say, ‘What's going on? How can we help keep you on a trajectory of high performance?’”

Each of AltSchool’s quarterly review periods yields real changes for the company as well as employees. Ventilla cites three key outflows of this process: 1) It allows AltSchool to make valuable changes, many of which are implemented immediately: re-orgs, manager changes, role changes, and the addition of more guidance and support resources, for example; 2) employees receive specific, actionable feedback on their performance; and 3) it allows the company to more objectively establish compensation brackets and bonus parameters.

“It's a cost, but the amount of visibility we get is pretty amazing. It's also pretty incredible when someone joins as a director of a team, or as a VP, or as a C-level, and we can give them a holistic sense of everyone's skills and performance. We can say, ‘This is the company. These are the people. This is how they're doing. This is where they're at.’”

Our system gives us a powerful summary view of the most important thing that our company has — our people, and how they're growing and how they're performing.

As they take that high-level view of the staff every quarter, there’s one more thing the calibration committee keeps an eye on: the bus test. “That is, if this person got hit by a bus, how screwed would the organization be?" says Ventilla. “You want your star performers to not fail the bus test. You don't want to be fully dependent on them. We’re formal about that, and we put the burden on the individual to come up with a solution if we do think they're a single point of failure.” Obviously, startups can’t remove people from key roles without an impact, but there are always things that can be done to ensure that no employee becomes a lynch pin to that degree: hiring the right support roles, for example, or sharing more information.

Build In Smart Incentives

With its careful calibration of every rating, the committee oversees another key task: Ensuring a fair and objective compensation structure. Annual reviews are often tied to compensation, and AltSchool’s quarterly reviews are no different. Every employee is eligible for a discretionary bonus, and that bonus is set by the scores received every quarter.

“The equation we use is very clear, and I really do believe that we’re not more than one, maybe two granular ratings off. Somebody really might be EE-2 and they might only get an EE-0 rating. But that's about it. Over four quarters, those little fluctuations smooth out,” says Ventilla.

Another benefit to reviewing more frequently? It accommodates fluctuations in employees’ actual performance, too — which isn’t necessarily a bad thing. “In general, I think you want to see people have two great quarters, one good quarter and one bad quarter.”

You want people to reach and occasionally hit it out of the park. The consequence of that is that sometimes they don't.

By assessing performance every quarter, AltSchool creates an environment where employees can do just that without fear of tanking their bonuses. “It actually incentivizes that higher-volatility performance we want to see.”

AltSchool’s bonus calculation looks like an S curve. Ratings at the outer edges of the curve, the very high and the very low scores, result in greater changes in the bonus multiplier. In the middle — the difference between, say, an “exceeds expectations 1” and “exceeds expectations 2” — differences don’t significantly change the multiplier. Each employee’s bonus starts at a minimum amount, which is then adjusted by both the company multiplier (based on annual objectives achieved) and the individual multiplier (the aggregate of those quarterly performance ratings).

“We’ve found a system that's incredibly useful. It's fairly efficient and there's all kind of things that we can draft off of it: the way that we do promotion grants, or equity refreshers,” says Ventilla. “If you don’t have performance data, and people don’t have formal levels, decisions about compensation and advancement are arbitrary at worst — and, at best, it’s really hard to figure out how to incentivize the people who are really necessary for the organization.”

Look Beyond the Review

Promotions, on the other hand, are not part of the review process — although the wealth of performance data AltSchool has on hand at any given time certainly streamlines those decisions when the time comes.

“People should just be promoted when they're ready to be promoted and when it's right for them to be promoted. A manager can put someone up for a promotion at any time," Ventilla says.

The process itself is very lightweight, thanks to time already invested in performance reviews.

This also speaks to the enormous residual benefits of another tool AltSchool built to support its rigorous reviews: a formal performance rubric, stipulating the competencies required of each level of each department. That’s what employees are using to complete their peer reviews. “They're saying relative to a Level-5 marketing rubric, how is this Level-5 marketing person doing? Whatever the person's actual level is, that's what they should be judged against.”

When it come to promotions, employees are assessed against the rubric, too — this time for the role they’d be moving into — using a scale from zero to 100%. “A normal promotion packet will look like 100% on this one, 100% on this one, 100% on this, 80% on this one, 60% on this and 20% on this one,” says Ventilla. “The expectation is not that a Level-4 is doing all the aspects of an Level-5 job. But as a Level-4, if you're only doing 20% of all the aspects of Level-5 job, you would basically fall on your face at that next level up.”

That formal leveling process has been key to AltSchool’s growth; Ventilla recommends that startups implement their own as soon as possible.

If you try to deploy a performance rating process without formal levels, you’re going to get garbage back.

"An intern and a CEO should be held to a different standard. If you compare everyone as equals, the junior people aren’t going to stack up.” Formalizing levels may initially be fraught — Ventilla’s early team was incredulous about the need for levels, and in some cases unhappy to see where they fell — but it turned out to be worth it.

There are ways to mitigate the potential for uproar, too — and to keep your levels from limiting you unnecessarily.

“When we hire someone, we de-couple level from compensation. There are compensation bands for every level, but your actual comp can be plus or minus a level,” says Ventilla.

He’s found that this system allows the company to level employees appropriately, without fighting hires’ instinct to maximize salary. “It's been less contentious, and we actually had a lot of people come in under level. We want to create an incentive where it's better to be under level than not, because you have an easier time getting good performance ratings. You can get your legs underneath you.”

AltSchool wants its employees to have room to grow, and it backs that up in the form of serious equity incentives. “Most companies give the vast majority of their equity in the new hire grants. We reserve about half of our option pool for promotion and follow-on grants,” Ventilla says. The idea there is to emphasize the value of longevity. “If about half the people are sticking around, and half of the options are given to people that stick around, that means if you stick around you're tripling your equity on average.”

But if rethinking equity packages or compensation bands feels like too much for now, just heed Ventilla’s most important piece of advice when it comes to performance reviews: “If I were talking to another entrepreneur, I would just say, ‘Start,’” he says. “Quantity generally leads to quality. Just start, and do it regularly. Given your culture, given your business, given your resources, come up with your own flavor. Every single time we do this, I think to myself, ‘I wish we were doing this more often’ — it's never a waste of time.”